Florida Enforces its 5% Tax on Independently Procured Captive Coverage

Captive insurance can address risks that may be difficult or expensive to insure in the commercial market. It can also create a Florida reporting and premium-tax obligation that is easy to overlook. Businesses that directly purchase coverage from an out-of-state or non-U.S. captive should evaluate Florida’s independently procured coverage rules, not just the captive’s federal tax treatment, risk distribution and domicile requirements.  

Florida insured that directly procures, continues or renews qualifying coverage from an unauthorized foreign or alien insurer legitimately licensed in its home jurisdiction generally must report the coverage when the subject of insurance is a resident, located or to be performed in Florida. Coverage placed through a licensed Florida surplus-lines agent and certain narrowly exempt coverages are excluded. For a Florida-only risk, the tax is generally 5% of gross premium. Multistate policies require a separate home-state and exposure-allocation analysis and should not be assumed to be taxed at 5% on every dollar of premium. 

For multistate coverage, first determine the insured’s “home state” under the federal Nonadmitted and Reinsurance Reform Act. Then document the location of the insured exposures and the method used to allocate premium. A mailing address alone may not establish the correct reporting and tax treatment, particularly when one policy covers several affiliates. 

An important threshold issue is whether the captive issued the insurance policy directly or participated only as a reinsurer behind a fronting carrier. A fronted program should be evaluated using the direct policy, premium invoices, fronting agreement, reinsurance agreement and cash flows. The captive’s reported premium revenue, standing alone, does not establish the amount subject to Florida’s independently procured coverage tax. 

Florida’s independently procured insurance rules have been on the books for years. What makes them especially important now is the state’s established reporting system and an active reconciliation process that can identify differences between insurer information and policyholder filings. For owners, CFOs and controllers with complex insurance structures, this is a good time to check whether the filings match the facts.

How Florida’s 5% Insurance Premium Tax Works 

Under Florida Statute §626.938, an insured that procures, continues or renews certain insurance from an unauthorized foreign or alien insurer may have a Florida reporting and tax obligation when the insured risk is resident, located or performed in Florida. The statute imposes a tax equal to 5% of the gross premium on qualifying independently procured coverage. When §626.938 applies, the Florida insured, not captive, is generally responsible. 

That distinction matters for captive insurance companies. If a Florida business purchases coverage directly from a related captive located in another state or country, the transaction shouldn’t automatically be viewed only through the captive domicile’s rules. The Florida insured also needs to consider whether its purchase falls within the independently procured coverage provisions. 

The Florida Surplus Lines Service Office’s current IPC guidance defines independently procured coverage, or IPC, as coverage obtained without the assistance of a licensed and appointed Florida surplus lines agent. When a business directly purchases or places that coverage, the IPC account holder is responsible for applicable reporting, taxes and fees. 

The service fee is separate from the 5% IPC premium tax. As of August 2026, FSLSO’s service fee is 0.03% for new and renewal policies effective on or after July 1, 2026. Policies effective from April 1, 2020 through June 30, 2026 generally remain subject to the prior 0.06% rate, although the statutory provisions reference a service fee of up to 0.3%, FSLSO currently assesses the fee at 0.03% for new and renewal policies effective on or after July 1, 2026, and subsequent endorsements generally use the rate tied to the policy’s applicable new-business or renewal effective date.

Why Florida Captive Insurance Tax Compliance Is Getting Attention 

A missed filing can be harder to overlook than businesses might expect. 

FSLSO operates a Premium Reconciliation Program that compares information submitted by surplus lines insurers with information filed by Florida surplus lines agents and IPC filers. The program matches records using details such as the policy number, premium amount, insurer name and effective date. If information doesn’t line up, the discrepancy can be identified for follow-up. 

FSLSO publishes quarterly reconciliation reports and documents how insurer-reported policy information is matched against filings made by surplus-lines agents and IPC filers. Variances may lead to requests for correction, documentation or payment. 

This matters to captive owners because direct placement doesn’t mean invisible placement. A company may have solid captive documentation, sound actuarial support and appropriate insurance policies while still having a separate Florida filing problem. 

Florida also continues to update the systems used for these filings. In Bulletin 2026-01, dated February 13, 2026, FSLSO announced technical filing changes effective July 1, 2026. These include a new Unique Market Reference requirement for Lloyd’s transactions and updated XML and CSV batch-file formats. The bulletin does not change the 5% IPC tax, but businesses using Lloyd’s coverage or automated batch filing should confirm that their procedures have been updated.

Which Captive Insurance Arrangements May Be Affected? 

There isn’t a single test that says every Florida business with a captive owes the tax. The facts of the insurance arrangement matter. 

A useful starting point is to ask six questions. Who issued the policy directly to the insured—the captive or a fronting carrier? Is the captive unauthorized in Florida but legitimately licensed in its domicile?  Was the coverage obtained without a licensed and appointed Florida surplus-lines agent? Is Florida the insured’s home state under the NRRA?  Where are the covered risks and exposures located?  Does a statutory exemption, prohibited line or other special rule apply? 

When those factors are present, the independently procured coverage rules deserve careful review. 

The analysis can become more complicated when one policy covers several affiliates or risks in multiple states. Florida law contains specific provisions for policies with risks or exposures inside and outside the state, so businesses shouldn’t rely on a simple headquarters address to determine the answer. 

This is the kind of issue we regularly see in the broader state and local tax world. A company’s tax responsibilities can extend beyond the obligations that appear most obvious from its day-to-day operations. Our Florida state and local tax resources provide additional information on Florida compliance considerations for businesses with more complex tax profiles. 

What Are the Florida IPC Filing Requirements? 

Timing matters. 

Florida law generally requires an insured subject to §626.938 to report qualifying coverage within 30 days after the insurance is procured, continued or renewed. FSLSO likewise states that premium-bearing policy transactions must be submitted electronically through SLIP+ or an approved electronic filing method within 30 days of the effective date. 

The tax and applicable service fee are then handled through FSLSO under the state’s payment rules. Section 626.938 also provides that delinquent IPC tax bears 6% annual interest, compounded annually. Rates and requirements are current as of August 2026.  

That makes historical review important. If a business determines that a prior-year captive policy should have been reported but wasn’t, the concern may extend beyond the original 5% tax. 

The records supporting that review should include the policies themselves, premium amounts, effective dates, captive financial information, and details showing where the insured risks were located. For multi-state coverage, the company should also understand how premiums and exposures were assigned among jurisdictions. 

What Should Florida Businesses With Captives Do Now? 

We recommend treating this as a fact-finding exercise before assuming there’s either a problem or no problem.

Start by identifying every policy and premium-bearing transaction involving an out-of-state or non-U.S. captive. Match those payments to the underlying policies and determine which Florida entities, property, operations or other risks were insured. Then compare those records with the company’s historical IPC filings and payments.

If everything was filed correctly, that documentation gives the business a much stronger position if questions arise. If something doesn’t match, identifying the issue internally gives management an opportunity to understand the potential exposure and discuss the appropriate response with its advisors.

Businesses with several legal entities or operations in multiple states should pay particular attention to allocation methods. Insurance documents, tax filings, and accounting records should support one another.

Our State & Local Tax Services team works with businesses on Florida and multistate compliance issues, including situations where an obligation may have been overlooked in prior periods. 

Review Your Florida Captive Insurance Premium Tax Exposure Now 

A captive can be an important part of a company’s risk-management program, but the insurance structure can create state reporting responsibilities that sit outside the usual federal tax discussion. Florida’s 5% independently procured coverage tax is one of them. 

If your business pays premiums directly to a non-U.S. captive, we can help you review the policies, insured risks, historical filings and potential Florida exposure. Getting the facts organized now can make the next decision much easier, whether the review confirms compliance or identifies something that needs attention. 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.